Broadcom stock dropped 4.2% on Jan. 14 as multiple concerns hit at once. Reports of Chinese restrictions on U.S. software, a large debt offering, and insider stock sales created short-term pressure.
Broadcom Inc., AVGO
Wells Fargo saw something different in the selloff. The firm upgraded Broadcom to “Overweight” from “Equal-weight,” arguing the dip created a better entry point rather than signaling trouble ahead.
Analyst Aaron Rakers pointed to growing visibility into catalysts through 2026. The upgrade comes as Broadcom deepens its partnership with Alphabet on tensor processing units, strengthening its position in AI infrastructure.
The firm didn’t just upgrade the rating. Wells Fargo raised its 2026 revenue estimate from $97 billion to $100.3 billion and earnings per share from $10.36 to $10.80.
For 2027, the numbers climbed even higher. Revenue projections jumped from $130.5 billion to $143.8 billion, with EPS rising from $13.90 to $15.35.
The revised estimates center on accelerating AI demand. Wells Fargo now expects Broadcom’s AI semiconductor revenue to reach $52.6 billion in 2026, representing 116% year-over-year growth.
The 2027 projection sits at $93.4 billion, which would mark 78% growth. These numbers assume AI workload demand continues to scale across hyperscale customers.
Broadcom’s recent earnings support the optimistic view. The company beat Q4 fiscal 2025 expectations on Dec. 11 with revenue climbing 28% year-over-year to $18.02 billion.
Adjusted earnings per share hit $1.95, beating analyst estimates of $1.87. Non-GAAP operating income increased 35% to $11.9 billion.
AI semiconductor revenue surged 74% in the quarter. That came in well above the company’s own guidance, showing stronger demand than management expected.
Infrastructure software revenue also exceeded expectations. The segment housing VMware grew 19%, accelerating from the previous quarter despite some customer pushback on pricing changes.
Broadcom guided for Q1 fiscal 2026 AI semiconductor revenue to double year-over-year to $8.2 billion. Total revenue guidance came in at $19.1 billion with adjusted EBITDA margins of 67%.
Cash and cash equivalents reached $16.2 billion at quarter-end, up from $10.7 billion the previous quarter. The balance sheet improvement gives the company flexibility for continued investment.
Analysts expect earnings to keep climbing. Consensus forecasts call for Q1 fiscal 2026 EPS of $1.66, up nearly 19% year-over-year.
Full-year 2026 earnings are projected to climb 49% to $8.39. Fiscal 2027 estimates call for another 46% increase to $12.23.
Mizuho analyst Vijay Rakesh raised his price target from $450 to $480 while maintaining an “Outperform” rating. Oppenheimer’s Rick Schafer maintained a buy rating with a $450 price target.
Barclays issued a buy rating on Jan. 16 as well. However, TipRanks-PerPlexity downgraded the stock to hold on Jan. 14.
Wall Street consensus remains bullish. Out of 42 analysts covering Broadcom, 36 rate it a “Strong Buy,” three say “Moderate Buy,” and three recommend “Hold.”
The mean price target of $455.22 implies 29% upside from current levels. The street-high target of $535 represents potential gains of 52%.
AVGO stock trades at 40.8 times forward adjusted earnings and 25.5 times sales. Both multiples exceed industry benchmarks and Broadcom’s own five-year averages.
The company has increased its dividend for 15 consecutive years. The annual dividend stands at $2.60 per share, yielding 0.76%.
Corporate insider sentiment turned negative over the past quarter. Insiders increased their selling compared to earlier in the year, with Chief Legal Officer Mark David Brazeal selling 30,000 shares for $10.4 million earlier this month.
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